Europe races for debt solution = Euro in danger 1

PARIS (AP) — European leaders rushed Monday to stop a rampaging debt crisis that threatened to shatter their 12-year-old experiment in a common currency and devastate the world economy as a result. One proposal gaining prominence would have countries cede some control over their budgets to a central European authority. In a measure of how rapidly the peril has grown, that idea would have been unthinkable even three months ago. World stock markets, glimpsing hope that Europe might finally be shocked into stronger action, staged a big rally. The Dow Jones industrial average in New York rose almost 300 points. In France, stocks rose 5 percent, the most in a month. More relevant to the crisis, borrowing costs for European nations stabilized. They had risen alarmingly in recent weeks — in Greece, then in Italy and Spain, then across the continent, including in Germany, the strongest economy in Europe. The yields on benchmark bonds issued by Italy and Germany rose, but only by hundredths of a percentage point. The yield fell 0.1 percentage point on bonds of France, 0.14 points for those of Spain and 0.22 points for Belgium. Allowing a central European authority to have some control over the budgets of sovereign nations would create a fiscal union in Europe in addition to the monetary union of the 17 countries that share the euro currency. Some analysts have said that would be a leap toward creating a United States of Europe. More delicately, it would force the nations of Europe to swallow their national pride, cede some sovereignty and agree to strengthen ties with their neighbors rather than fleeing the euro union during the crisis. "The common currency has the problem that the monetary policy is joint, but the fiscal policy is not," Germany's finance minister, Wolfgang Schaeuble, said in a meeting with foreign reporters in Berlin. The monetary union has existed since the euro was created in 1999, but the European Union, which includes the 17 euro nations and 10 others that use their own currencies, has no central authority over taxing and spending. Countries like Ireland, Portugal, Spain, Greece and Italy overspent wildly for years and racked up annual budget deficits that have left them with monstrous debt. Italy holds €1.9 trillion in debt, or 120 percent of the size of its economy. A fiscal union could prevent excessive spending in the future. More important, it would be a step toward addressing today's debt crisis: It could provide cover for the European Central Bank to stage a massive intervention in the European bond market to drive down borrowing costs and keep the debt crisis under control. So far, the ECB has resisted, in part because of concerns that bailing out free-spending countries would only encourage them to do it again, a concept known as moral hazard. Enforced budget discipline would ease those concerns. A fiscal union would also pose a practical problem — how to make such a body democratically accountable. Another option is for the 17 nations in the euro group to sell bonds together, known as eurobonds, to help the countries in the deepest trouble because of debt. Germany has resisted such a plan, because it would raise borrowing costs for it and other nations that have good credit ratings. While Europe buzzed over the possible solutions, finance ministers of the euro nations prepared for a summit beginning Tuesday evening in Brussels, to be joined the following day by ministers from the rest of the European Union. Italy readied an auction of bonds designed to raise €8 billion, or about $10.6 billion, and steeled itself for the high interest rates it will have to pay. In Washington, President Barack Obama huddled with European Union officials, but the White House insisted Europe alone was responsible for fixing its debt problems. Obama said failing to resolve the debt crisis could damage the U.S. economy, which has grown slowly since the end of the recession in June 2009 and still has 9 percent unemployment. "If Europe is contracting, or if Europe is having difficulties, then it's much more difficult for us to create good here jobs at home," Obama said at an annual meeting between U.S. and EU officials. Despite signs of possible progress on the debt crisis Monday, the euro has appeared to be in increasing danger the past few weeks. Experts said the currency could fall apart within days without drastic action, with consequences rivaling those of the 2008 financial crisis. "Everyone knows that if the eurozone crashes the consequences would be very dramatic and in the race after that there would no winners, just losers," said Finland's finance minister, Jutta Urpilainen. For countries that decided to leave the euro group and return to their own sovereign currency, the conversion would be wrenching. If Germany broke away, for example, its national currency could rise in value quickly because the German economy is stronger than the European economy as a whole. But a stronger German mark would damage the German economy because Germany depends heavily on exports, and it would cost more for everyone else to buy German goods. As for weaker countries that decided to leave, depositors would probably yank money out of their banks, fearing a plummeting currency. Savers in Greece would not want their euros replaced with, say, feeble drachmas. If countries tried to repay their old euro debts with their own currencies, they'd be considered in default and would struggle to sell bonds in global financial markets. Corporations would face the same squeeze. Overall, economists at UBS estimate, a weak country that left the eurozone would see its economy shrink by 50 percent. Currency chaos and defaults by governments and companies would weaken European banks and also cause them to stop lending to each other. Because banks are connected globally, a credit freeze in Europe would spread. As it did in 2008, a credit freeze would cause stock markets to sell off worldwide, and another deep recession would probably follow. Wolfgang Munchau, a columnist for the influential Financial Times newspaper, wrote Monday that the common currency "has 10 days at most" to avoid collapse. He called for decisions on a fiscal union and the creation of a powerful common treasury. Unlike the United States, which has centralized institutions in Washington for raising taxes and spending money, the euro nations have 17 independent treasuries with little oversight from Brussels, the headquarters of the EU. That would change under the fiscal union proposal being aired ahead of another summit of EU leaders that begins Dec. 9. Ten nations in the EU do not use the euro currency, most notably Britain. While not explicitly backing a fiscal union, Germany and France have promised to propose measures that will make the 17 euro countries operate under strict and enforceable rules, so that no single country can wreak continent-wide damage. Already, the Organization for Economic Cooperation and Development, an international group devoted to economic progress, warned that the global economy would be rocky in coming months. In its six-month report Monday, it said the continued failure by EU leaders to stem the debt crisis "could massively escalate economic disruption" and end in "highly devastating outcomes." The latest turmoil came last week, after Germany tried to auction $8 billion worth of its national bonds and could persuade investors to buy only $5.2 billion. It was a sign that even mighty Germany was not immune from the debt crisis. Investors around the world will watch the Italian bond auction Tuesday. If it receives a similarly poor reception, more European countries will be in danger of being locked out of the international bond market. Exactly how a fiscal union would take shape in Europe is an open question. Schaeuble, the German financial minister, said the proposal would require passage only by the 17 countries that use the euro currency. The other 10 countries in the EU, such as Britain, Poland and Sweden, could adopt it if they wanted to. But analysts said such a move would take a long time to come to fruition. "We do seem to be moving slowly towards more of a fiscal union but at a pace that may result in all the components being put in place after a complete meltdown of the financial system," said Gary Jenkins, an economist with Evolution Securities. Many think the ECB is the only institution capable of calming frayed market nerves. But Merkel, the German chancellor, has continually dismissed the prospect of a bigger role for the ECB.

Chance of 2012 U.S. recession tops 50 percent: Fed paper

(Reuters) - The European debt crisis is raising the odds of a U.S. recession, with economic contraction more likely than not by early 2012, according to research from the San Francisco Federal Reserve Bank.

While it is difficult to gauge the odds precisely, an analysis of leading U.S. economic indicators suggests a rising chance of a recession through the end of the year and into early next year, researchers at the regional Fed bank wrote on Monday. The risk of recession recedes after the second half of 2012, they found.

New governments in Greece and Italy, with fresh promises to tackle fiscal problems have in recent days, allayed investor concerns about a near-term sovereign debt default in the euro zone, but Europe's debt crisis is far from resolved. The region is facing its worst hour since World War II, German Chancellor Angela Merkel said on Monday.

Although domestic threats to economic growth in the United States are limited, a shock from abroad could derail a fragile recovery.

The weak U.S. economy is more than usually vulnerable to turbulence beyond its borders, as the unexpectedly severe U.S. effects from Japan's devastating earthquake in March demonstrates, the researchers said.

"A European sovereign debt default may well sink the United States back into recession," wrote Travis Berge, Early Elias and Oscar Jorda in the latest San Francisco Fed Economic Letter. "However, if we navigate the storm through the second half of 2012, it appears that danger will recede rapidly in 2013.

The assessment of recession risk is more dire than that of many private economists. A November 4 Reuters poll of primary dealers shows Wall Street economists see a 30 percent chance of a U.S. recession next year, down from 35.5 percent a month earlier.

Last week the Federal Reserve's influential vice chairwoman Janet Yellen warned on the threat from Europe, saying governments there need to take forceful steps to contain the crisis or risk substantial damage to the United States.

Before taking her post at the Fed Board in Washington, Yellen headed the San Francisco Fed.

Her successor, John Williams, is due to give a major policy speech on Tuesday.

(Reporting by Ann Saphir; Editing by Padraic Cassidy)
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Health Benefits: Cinnamon and Honey

Honey is the only food on the planet that will not spoil or rot. What it will do is what some call 'turning to sugar'. In reality, honey is always honey. However, when left in a cool dark place for a long time it will "crystallize". When this happens loosen the lid, boil some water and sit the honey container in the hot water, but turn off the heat and let it liquefy naturally. It is then as good as it ever was. Never boil honey or put it in a microwave. This will kill the enzymes in the honey.Cinnamon and Honey Bet the drug companies won't like this one getting around. Facts on Honey and Cinnamon: It is found that a mixture of honey and Cinnamon cures most diseases. Honey is produced in most of the countries of the world. Scientists of today also accept honey as a 'Ram Ban' (very effective) medicine for all kinds of diseases. Honey can be used without side effects for any kind of diseases. Today's science says that even though honey is sweet, when it is taken in the right dosage as a medicine, it does not harm even diabetic patients. Weekly World News, a magazine in Canada, in its issue dated 17 January,1995 has given the following list of diseases that can be cured by honey and cinnamon, as researched by western scientists:



HEART DISEASES: Make a paste of honey and cinnamon powder, apply it on bread instead of jelly and jam and eat it regularly for breakfast. It reduces the cholesterol in the arteries and saves the patient from heart attack. Also, those who have already had an attack, when they do this process daily, they are kept miles away from the next attack. Regular use of the above process relieves loss of breath and strengthens the heart beat. In America and Canada, various nursing homes have treated patients successfully and have found that as one ages the arteries and veins lose their flexibility and get clogged; honey and cinnamon revitalize the arteries and the veins.

WEIGHT LOSS: Daily in the morning one half hour before breakfast and on an empty stomach, and at night before sleeping, drink honey and cinnamon powder boiled in one cup of water. When taken regularly, it reduces the weight of even the most obese person. Also, drinking this mixture regularly does not allow the fat to accumulate in the body even though the person may eat a high calorie diet.

ARTHRITIS: Arthritis patients may take daily (morning and night) one cup of hot water with two tablespoons of honey and one small teaspoon of cinnamon powder. When taken regularly even chronic arthritis can be cured. In a recent research conducted at the Copenhagen University, it was found that when the doctors treated their patients with a mixture of one tablespoon Honey and half teaspoon Cinnamon powder before breakfast, they found that within a week (out of the 200 people so treated) practically 73 patients were totally relieved of pain -- and within a month, most all the patients who could not walk or move around because of arthritis now started walking without pain.

BLADDER INFECTIONS: Take two tablespoons of cinnamon powder and one teaspoon of honey in a glass of lukewarm water and drink it. It destroys the germs in the bladder..

CHOLESTEROL: Two tablespoons of honey and three teaspoons of Cinnamon Powder mixed in 16 ounces of tea water given to a cholesterol patient was found to reduce the level of cholesterol in the blood by 10 percent within two hours. As mentioned for arthritic patients, when taken three times a day, any chronic cholesterol is cured. According to information received in the said Journal, pure honey taken with food daily relieves complaints of cholesterol.

COLDS: Those suffering from common or severe colds should take one tablespoon lukewarm honey with 1/4 spoon cinnamon powder daily for three days. This process will cure most chronic cough, cold, and, clear the sinuses.

UPSET STOMACH: Honey taken with cinnamon powder cures stomach ache and also clears stomach ulcers from its root.

GAS: According to the studies done in India and Japan, it is revealed that when Honey is taken with cinnamon powder the stomach is relieved of gas.

IMMUNE SYSTEM: Daily use of honey and cinnamon powder strengthens the immune system and protects the body from bacterial and viral attacks. Scientists have found that honey has various vitamins and iron in large amounts. Constant use of Honey strengthens the white blood corpuscles (where DNA is contained) to fight bacterial and viral diseases.

INDIGESTION: Cinnamon powder sprinkled on two tablespoons of honey taken before food is eaten relieves acidity and digests the heaviest of meals.

INFLUENZA: A scientist in Spain has proved that honey contains a natural 'Ingredient' which kills the influenza germs and saves the patient from flu.

LONGEVITY: Tea made with honey and cinnamon powder, when taken regularly, arrests the ravages of old age. Use four teaspoons of honey, one teaspoon of cinnamon powder, and three cups of water and boil to make a tea. Drink 1/4 cup, three to four times a day. It keeps the skin fresh and soft and arrests old age. Life spans increase and even a 100 year old will start performing the chores of a 20-year-old..

RASPY OR SORE THROAT: When throat has a tickle or is raspy, take one tablespoon of honey and sip until gone. Repeat every three hours until throat is without symptoms.

PIMPLES: Three tablespoons of honey and one teaspoon of cinnamon powder paste. Apply this paste on the pimples before sleeping and wash it off the next morning with warm water. When done daily for two weeks, it removes all pimples from the root.

SKIN INFECTIONS: Applying honey and cinnamon powder in equal parts on the affected parts cures eczema, ringworm and all types of skin infections.

CANCER: Recent research in Japan and Australia has revealed that advanced cancer of the stomach and bones have been cured successfully. Patients suffering from these kinds of cancer should daily take one tablespoon of honey with one teaspoon of cinnamon powder three times a day for one month .

FATIGUE: Recent studies have shown that the sugar content of honey is more helpful rather than being detrimental to the strength of the body. Senior citizens who take honey and cinnamon powder in equal parts are more alert and flexible. Dr. Milton, who has done research, says that a half tablespoon of honey taken in a glass of water and sprinkled with cinnamon powder, even when the vitality of the body starts to decrease, when taken daily after brushing and in the afternoon at about 3:00 P.M., the vitality of the body increases within a week.

BAD BREATH: People of South America, gargle with one teaspoon of honey and cinnamon powder mixed in hot water first thing in the morning so their breath stays fresh throughout the day.

HEARING LOSS: Daily morning and night honey and cinnamon powder, taken in equal parts restores hearing.

Remember when we were kids? We had toast with real butter and cinnamon sprinkled on it!

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